All Forum Posts by: Darcy Dawe

Hey Darcy,

Congratulations on closing on your first rental property! As you look to scale your portfolio, first, ensure your mortgage terms allow for flexibility, such as the ability to refinance or access equity. Making a larger down payment can improve your loan terms, but keeping some cash reserves is also crucial for unexpected expenses and future investments. Consider tapping into the equity of your first property once it appreciates, using that as a down payment for your next property. This strategy can help you expand your portfolio without needing extensive cash reserves each time. Additionally, maintaining a strong credit score and keeping your debt-to-income ratio in check will make it easier to secure financing for future properties. Planning ahead and staying financially disciplined now will set you up for successful growth in the years to come. Hope this helps! Feel free to reach out to me directly if you have any other questions or if you would like to discuss. And of course, if you want to talk financing hit me up!

Hi @Darcy Dawe

My advice will probably mirror what other have said and will say. In my opinion house hacking is a great way to start. You can buy with a low down payment, have your living expenses either drastically reduced, or completely covered while you live there. You can take your monthly savings and build your financial position by either paying off debts, increasing your savings rate, or investing in other properties. You can buy a 2-4 unit building when you use low down payment financing. If you do a house hack a 4 unit building once every year or 2, then you can have 20-40 units over the next 10 years. 

I started off with a straight investment property (25% down payment), then house hacked my next two properties. I currently have 7 units over 3 buildings. I believe if that first one was a house hack that I would probably have been able to scale a lot faster than where I am today.

In the meantime, keep putting away cash, and continue to educate yourself with books, podcasts, and forums like the one on bigger pockets. 

Good luck on your journey!

Jon

Hi @Darcy Dawe great question! When you are analyzing your deals make sure to the best of your ability estimate your net equity position after 1, 3 and 5 years. This should help give you an idea of what you can do after closing to grow your portfolio (how long you need to wait until you have enough equity saved for your next purchase). 

Once you have your property purchased, and fast forward several years, you have enough saved up for your next purchase. Consider refinancing to pull out your equity and make your next purchase. If you do this you will pay capital gains, but if you wanted to avoid this you can 1031 your funds into a bigger property (hopefully one with multiple units).

I wish you the best of luck in all your deals!

I also got started around that age! I always recommend the book “Rich dad, Poor dad” by Robert T. Kiyosak to anyone who is starting out. Start listening to the BiggerPockets podcast starting at the very beginning. Start growing your network, look on Facebook/BiggerPockets for different events, find a mentor who is doing what you want to do, and get to know the local lenders/brokers.

My question back to you would be how big do you want to grow and how quickly do you want to scale it? Questions like this are hard to answer unless you can get an idea of your goal first. Is your goal for a certain dollar amount in cashflow, is it to flip properties and reinvest those profits into rentals? I'd first recommend thinking about that more.

I'll give you an example of something I'd recommend to someone looking to start in their 20s that's just looking to get started and start building up some cashflow. You could house hack hop (buy a duplex to house hack, the next year buy another and live in that one, next year buy another and live in that one, etc.). Depending on the market you could have your mortgage paid for or mostly paid for and save that extra money with the purpose of reinvesting it later. Then you're also slowly building up cashflow as you move out and rent out the space you were living in. 

get fully pre approved for the loan that you will need/ use

Stay patient, keep learning, and stack your money! Get out and network if you can. The more experienced real estate investors you meet, the better!

hey Darcy , let me throw in my (inexperienced) two cents:

I recently bought my first rental property which is quite similar to type one that you mentioned. Extremely hot market, where rents just about cover expenses. The problem is, that although I believe the house will appreciate a lot, it  tied down my capital, and made it very hard for me to grow my portfolio without cash flow. I think the right thing would be to go with the one that cash flows. That being said, make sure you’re covered during the time of rehab which always takes longer than expected.

best of luck!!